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The Trada Model: Crowd-sourcing paid search?

So many potential advertisers, but how to get them on board?

We in the industry have recognized for years that there are far more potential advertisers — thinking local businesses, here — who could spend a little money on paid search than there are national advertisers who can (and do) spend a ton. The challenge is how do you get them on board?

Self-management is problematic.

Google’s self-management tools are pretty good and improving, but it’s still a lot for a local business owner to absorb, and that’s a tough pill to swallow when that owner is also responsible for running every other aspect of a business. Particularly if the upside is small, it’s hard for them to justify the time it takes to learn the system.

Agency management isn’t an option.

Paid search agencies haven’t figured out a way to serve this market profitably. Setting up a good program takes time, and if the advertiser can’t smartly spend but a couple hundred bucks a month on media in a geo-targeted program they can’t afford to pay an agency to do the work for them. Between the labor to build and maintain the program, and the marketing cost associated with attracting, signing, invoicing these clients, it isn’t worth it for an agency if they have to charge what the advertiser can afford.

Is Crowd-sourcing the answer?

Enter Trada. This March 2010 start-up, funded in part by Google Ventures, provides a mechanism for paid search marketers to do free-lance work for local businesses. The freelancers essentially compete with each other to buy advertising for the local business most cost-effectively. The advertiser just gives Trada an efficiency goal — I’m willing to pay $8 for a lead, or whatever — and the marketers compete to figure out who can generate money on the difference between what they pay for media and what the advertiser is willing to pay for the leads.

Sound familiar?

It sounds a lot like the affiliate marketing world, and I wonder if it’s actually going to work as intended. It seems to me that the fundamental problem remains the same: it takes real work to make paid search work for the advertiser, and if the program is tiny there isn’t enough money to pay the workers.

I’m willing to wager that it will quickly boil down to which marketer can launch keywords around the advertiser’s brand name the fastest and then they move on to the next advertiser. Why incur the risk and work associated with building out a real competitive search program and paying for the media and the cost of experimentation?

The fact that it may provide little real marketing value to the advertisers may not mean that it doesn’t work for Trada, for Google, and for the marketing professional who learn the game quickly. Mom and Pop may be willing to pay $200/month to Google for “advertising” and may not ever find out that the only business ‘generated’ by Trada was already “walking through their front door” proverbially speaking.

Am I missing something?

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Comments
22 Responses to “The Trada Model: Crowd-sourcing paid search?”
  1. billy wolt says:

    There are going to be some people making some serious money from this, and it won’t be the advertiser.

  2. Elaine Ellis says:

    Hey George,

    Thanks for talking about Trada on your blog. I recently stumbled on the Rimm Kaufman blog doing some research and was impressed!

    I wanted to clarify a couple things. We don’t take a “couple hundred bucks” campaign for the reason you cited. Our CEO addresses this issue in the blog post – How Much Data is Enough? http://trada.com/blog/2010/03/29/how-much-data-is-enough/ Also, we require that advertisers commit to the Trada marketplace for three months, as we believe that is part of the key to being successful in paid search and is what’s fair to our optimizers. Trada is actually built for advertisers spending between $3,000 to $50,000 each month in paid search.

    What Trada does do is solve the pain point you speak of – helping business owners enjoy the benefits of paid search without getting bogged down in the complicated nuances of running a program by themselves.

    Let me know if you have any more questions. I’d love to answer them for you.

  3. Hey – great post. I have been playing around with Trada and was thinking the same thing. The amount of work doesn’t seem to be worth money yet.

  4. Elaine, thank you so much for the clarification, and my apologies for the mistake. I’m learning more about the model and am intrigued!

    Not only is this an interesting solution for the small (but not tiny) players, I could see this being THE solution to international marketing. Small markets, huge barriers to entry relating to language and other engines besides the big 3 in the US (soon to be 2). You folks could provide a system for native speakers to earn what is a lot of money to them, but might not be a lot of money to advertisers.

    I’d love to talk with you if you have time!

  5. Elaine Ellis says:

    George, absolutely. We’re not quite there yet internationally but it is definitely on our road map. Shoot an e-mail to me at elaine at trada.com.

  6. Ian Orekondy says:

    If/when Trada scales, it’s a game-changer for many search agencies, I think.

    I’ve spoken with marketers who aren’t small or international that are beginning to use Trada. I believe Trada is a great option that opens up new markets, and it’s a potentially significant disruptive force to existing search and interactive agency models. And if you’re an advertiser, why pay an agency to optimize a campaign when you can use Trada and pay basically nothing? And if you’re a professional search marketing expert with serious skills, why work to make the agency partners rich, when you can reap 75% of your value on Trada? Trada doesn’t charge clients directly – they sImply take 25% of the optimizers’ profits.

    Within this new environment, the agency’s value shifts away from optimizing Google/Yahoo/Bing campaigns, and shifts closer to optimizing Trada.

    To me, Trada is empowering search experts to be there own boss to a large degree – which I think is a good thing.

    We’ll see how it plays out, but with Google’s backing, I think agencies need to pay some serious attention.

    Go Trada!

    Ian Orekondy

  7. Hi there,

    Thanks for this post. Trada have interested me recently. I was tempted to try out some campaign optimisation for them, though by the looks of it, it wouldn’t be worth my time for the amount of money they pay out. Anyone here actually working as an optimiser for Trada? I’d like to hear your views and get more of an idea of the money earned through this.

    Keen to hear your thoughts.
    Thanks,
    Louise

  8. CanaFlora says:

    I think guys like Yellow Pages etc already on that “tiny budget” market. They kind of offering solutions for the customers with 200-300$ budget. But it is a rip off as far as I know in terms of ROI so I don’t think there is a really good solution.

  9. Simon Cooper says:

    This is an interesting alternative between hiring an agency and doing it on house, but only for those advertisers that are half committed to PPC, and that is not the way to achieve maximum, cost effective results.

    For me, a successful PPC campaign is built by being very close to the business objectives of the advertiser and being able to have an open and constant dialogue with those people setting the targets. I can’t see where in this model that happens.

    How do the Optimisers learn about upcoming ATL campaigns that have a huge impact on search volumes?

    How do the Optimisers know about click attributions of other keywords, particularly those that someone else is managing?

    For me personally, I think Trade have a great initiative here, and are offering something completely different, but this model results in PPC working in a vacuum from the advertiser and their other marketing channels, and for me, that will not yield the best results.

  10. Tomas says:

    Hi George,

    my initial response to Trada was the same as yours: how is this different from affiliate marketing and the tactics people use for that. I doubt that aiming at advertisers with a slightly bigger budget will solve the problem b/c in my experience they’re not necessarily more committed or have a better understanding of performance metrics.
    As far as international expansion goes, i’d again argue that affiliate networks already provide that functionality (although perhaps at higher total cost). From what i’ve seen it’s pointless to have international campaigns in local languages if your site doesn’t back it up with a multilingual offering. You’re just going to end up with people who clicked on an ad and end up on a site they don’t understand. To target educated and informed international buyers it is cheapest to start an English campaign on your brand terms.
    I see Trada’s main benefit that it offering some form of quality control and entry level affiliate marketing. The link with Google will help establish trust. I’m curious to see the level of the ‘experts’ that sign up for this as i also believe the return on effort is too small to make anything but pocket money from this.

  11. I think the interesting point is what doesn’t work – Self Management nor Agencies (as you say, both with a rare few exceptions) and I’d bet Trada alone won’t work either. Or I should say it will be better than the alternative for very small (sub $5/mo) advertisers, but just barely and not always.

    I’ve come to believe a hybrid of the three is the only thing that can/will work. An agency or uber-consultant for strategy, tactical direction, and linear expertise on technical details like structure and quality score etc. An in-house person who knows the products/services, can take action on a dime and stay up late when needed, and (in a form not yet perfected) crowd-sourcing for ad copy writing, perhaps some creative keyword expansion, and landing page testing.

    To get there we need new technology platforms, new business models, and flexibility from the engines. There is a long distance to go before most advertisers are getting the account management quality and the results they deserve.

  12. Thanks for all the insightful comments, folks.

    Simon, I agree, and your point seems particularly responsive to Ian’s notion that this poses a big threat to traditional search agencies. I think there are a ton of really lousy paid search agencies that are finding it hard to stay in business as it is, and perhaps Trada will push them over the edge, but managing massive campaigns, with complex and changing objectives isn’t going to happen through this mechanism.

    Ian, I’d also argue that the advertiser absolutely is paying for this service. They pay Trada the difference between what they could buy the advertising for directly and what they pay with the markup for fees to Trada and the marketing pros working on the account. Indeed, the concern will be that if the margins for the laborers is too small, they’re not going to do it, if it’s too big the advertiser is overpaying, and at the end of the day the advertiser doesn’t control what they’re paying.

    Major advertisers aren’t going to give up control of their brand messaging to an anonymous pool, much less their ability to shift targets on the fly. Trada isn’t likely to incorporate margin data, or backfeeds relating to attribution, cancels/frauds, inventory levels, new-to-file stats, etc…

    I do see this as a potential benefit to freelance paid search professionals for whom the cost of finding new business makes it difficult to stay afloat.

    Great discussion folks, fascinating model.

  13. Craig, thanks for stopping by!

    It all comes down to the cost of management. It just can’t cost much to manage if the program is small. When the management costs (technology + humans) exceed 15 or 20% of the media spend, what’s the point? And, if the management costs are in line with the ad spend the quality of the program can only be so high.

    The reality may be that for some small businesses doing paid search really well just costs too much, and a low-cost low quality solution is the best they can do.

  14. Marc Adelman says:

    George,

    I’m glad you covered this, and that so many folks in the industry have chimed in. Trada’s model is a disruption model, and investors love disruption and looove “crowd sourcing”. It’s so social and fuzzy and exciting.

    There seems to be a few 800 pound gorillas in the room though, and you alluded to them.

    1. “if the margins for the laborers is too small, they’re not going to do it…”. Right, what happens when performance and efficiency slip on someones account. This would mean that no one is getting paid – not Trada and not the marketer. Usually when people are not paid, they are not motivated to provide things like, responsiveness, good customer service, and dedication to issues until they are resolved. When the carrot disappears in-front of the marketer, how does Trada ensure that performance can get into line?

    2. In the scenario of clients advertising on Branded Terms, when avg CPC cost less than $.11 in many cases, what will happen when the unknowing client says they want a CPC of $.51 or $.31 cents? They will get ripped off by a model that does not promote educating clients. I would suggest that Trada sets rates for branded terms, and protects their clients for any scenario even close to this.

    I am definitely tuned in to see how Trada grows and what people say about their experience using Trada.

    Regards to all at RKG

  15. George,

    Trada sounds great, who wouldn’t want to have 100’s of “optimizers” spending the advertiser’s money with “No obligations or commitments to an advertiser’s campaign.”

    Setting a campaign level Max CPA doesn’t sound like optimization–for the advertiser to set appropriate CPA’s that are actually profitable could be lots of work. And you couldn’t have 6K keywords in a campaign like their website suggests (not with one Max CPA).

    The way they present their service on their website it seems like there would be lots of keyword duplication with little regard for account structure–of course they do give the advertiser the privilege to review the keyword list and search queries (lots of work).

    I guess an “optimizer” could use other people’s money to get a PPC education (good for them). Also, it doesn’t look like they’ve built in much visibility, accountability, or learning.

    I think I would feel more comfortable giving Google my money and having them spend it for me. Oh wait, I’ve tried that and it doesn’t work either. I have a Google team of 2-3 people always offering optimizations, expansions, etc. based on their perception of a good CPA. Don’t get me wrong; when they build out a new campaigns, etc. they do a good job, but I have to make it work. They aren’t close enough to the business or the outcomes (Revenue, Profit, LTV, etc.).

    I see lots of agencies without the in-house expertise signing up to sell new services as a broker (middle-man) to the detriment of their clients.

    Craig’s comment lines up fairly close with my opinion. I can see the benefit of paying an expert to build out new campaigns, restructuring, strategy, etc., using good technology and an in-house expert to manage/ optimize the campaigns, while outsourcing known, repetitive, labor intensive, maintenance-like tasks (where the technology fails).

  16. Thanks for your comment, Chad. I look forward to speaking with the Trada folks to see how they think about these issues.

  17. Eric Seidel says:

    Thanks all for having this discussion.

    Our company is considering using Trada’s service. We sounds like a good fit, we spend about $5k a month on PPC and have an in-house person running it. Our staff person, like myself, is home grown from a talent stand-point (we both studied and passed the Adwords pro exam), he also runs our content calender and other web related items.

    We have about two years history to compare our CPC and realize there are professionals who may get us better results. Our biggest fear is the quality of the conversions, but time will tell. If anyone has any experaicne with advertisers who are using Trada we would love to hear about them.

    Anyhow, thanks for sharing your insights…

    Eric Seidel
    Web-Est, LLC

  18. Eric, if you do try it I’d love to hear how it works out. Lead quality is a crucial issue. If you double the number of leads but cut the quality in half you may actually lose in the long run by chewing up sales staff time.

    Best of luck!

    George

  19. Tom Rusling says:

    Interesting concept, and there’s definitely a challenge in the marketplace to find a palatable solution for the small and micro sized PPC campaign (< $25K). The first glaring hole that I see is that this approach is completely focused on pre-click and click optimization, and not on post-click. Post click optimization is consistently the area of greatest opportunity for improvement on the ROAS of a Pay Per Click campaign. In addition, finding effective new opportunities for growth in PPC means being willing to test outside your target ROAS metrics on the short term. The Trada approach would seem to block this growth testing. Those who know the industry well know that agency models that focus on a strictly performance style remuneration model (CPA bounty or even the dreaded flat CPC) are inherently riddled with the principal–agent problem. Billy Wolt’s first comment at the beginning of this discussion addresses this directly. That being said, the benefits of incentive alignment and post click optimization are more real in larger six figure per month campaigns, and indeed Trada could be a novel approach to solving the small account management dilemma.

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